Fitch Affirms Norton --KY-- 'BBB+' on $498MM Bonds.Business Editors NEW YORK--(BUSINESS WIRE)--May 28, 2004 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. affirms its underlying 'BBB+' rating on approximately $498 million Kentucky Economic Development Finance Authority and Jefferson County, Kentucky Jefferson County is a county located in the U.S. state of Kentucky. It was formed in 1780. As of 2000, the population was 693,604. As of 2006, the population estimate recorded by the U.S. Census Bureau is 701,500 [1]. debt issued on behalf of Norton Healthcare Norton Healthcare is Kentucky's largest healthcare system with 40 locations in and around Louisville, Kentucky. Founded in 1886, Norton's current major products include pediatrics; women's services; orthopedics; cardiac care; stroke care; advanced surgical services; cancer , Inc. (see issues listed below). The Rating Outlook is Stable. Norton's 'BBB+' rating is supported primarily by its leading market position, improved management practices, and strengthening financial profile. Norton's 2003 market share of 44.6% remains the credits primary strength and is well in excess of the next closest competitor Jewish Hospital Jewish Hospital can refer to:
The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. ) in fiscal 2003. Fitch notes these margins exclude donations and contributions included in other revenue. Concurrent improvement in Norton's bottom line margin has also led to improvement in maximum annual debt service (MADS; $53.2 million occurring in 2006) coverage of 1.9 times (x) through the interim period which is near Fitch's 'BBB' median of 2.2x. Chief credit concerns include historical operating losses and weakened balance sheet indicators, high days in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying , a high debt burden, and deferred capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. . Although gradual improvement has occurred, Norton's lack of historical operating profitability has led to limited growth in balance sheet indicators. Specifically, cash to debt and cushion ratio at fiscal 2003 were low at 48.3% and 5.4x, respectively. Days in accounts receivable declined to 75.4 days at the interim period from its high of 86.6 days in fiscal 2000, but remains well above Fitch's 'BBB' median of 56.2 days. Management stressed its focus on revenue maximization and expects this ratio to continue to decline. MADS as a percent of revenue and debt to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become although improving remain high at 5.8% and 5.9x, respectively. Norton's capital spending remained below depreciation expense in each of the last three fiscal years indicating some deferred maintenance. However, this is somewhat offset by Norton's relatively low average age of plant of 8.5 years at the interim period. Management does not have any plans to issue debt over the medium term. Fitch believes Norton has begun to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. its size and presence in the market. Fitch's rating and outlook reflect the expectation of continued improvement in Norton's operating profitability, revenue cycle management and balance sheet growth. Inability to meet the budgeted operating margin $3.5 million in 2004 and realize continued improvement beyond 2004 could place downward pressure on the rating. Norton is a non-profit, multi-hospital system headquartered in Louisville, Kentucky  “Louisville” redirects here. For other uses, see Louisville (disambiguation). . It operates seven hospitals with 2,106 staffed beds, serves a population base of about 1.5 million, and is the region's largest health care network. Norton covenants to supply bondholders with quarterly disclosure upon request. Norton's disclosure practices to Fitch have been excellent in terms of timeliness and thoroughness. Outstanding Debt: -- $148,285,000 Kentucky Economic Development Finance Authority, health system revenue bonds, series 2000A. -- $119,247,912 Kentucky Economic Development Finance Authority, health system revenue bonds, series 2000B insured by MBIA MBIA Montana Building Industry Association MBIA Municipal Bond Insurance Association MBIA Michigan Boating Industries Association MBIA Municipal Bond Investors Assurance MBIA Massachusetts Brain Injury Association MBIA Maryland Business Incubation Association Insurance Corp., whose insurer financial strength is rated 'AAA' by Fitch Ratings. -- $180,482,605 Kentucky Economic Development Finance Authority, health system revenue bonds, series 2000C insured by MBIA Insurance Corp., whose insurer financial strength is rated 'AAA' by Fitch Ratings. -- $49,995,000 County of Jefferson, Kentucky, health system revenue bonds, series 1997 - insured by MBIA Insurance Corp., whose insurer financial strength is rated 'AAA' by Fitch Ratings. |
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